TMBThanachart Bank (TTB TB): A Detailed Financial Performance Review

TMBThanachart Bank (TTB TB), the sixth-largest bank in Thailand, with a notable 10% share of the credit market, continues to demonstrate resilience and strategic focus in its operations. The bank has a strong emphasis on retail lending, which constitutes 56% of its total loan book. This article delves into TTB’s financial performance for 4Q24 and its future outlook as analyzed and recommended by UOB Kay Hian.

Key Highlights from 4Q24 Financial Results

TTB’s 4Q24 financial performance aligned with expectations, showcasing a net profit of Bt5.1 billion. This represents a modest 2% year-on-year (yoy) growth and a slight 2% quarter-on-quarter (qoq) contraction. Despite this, the bank has managed to demonstrate effective cost controls and a focus on maintaining asset quality.

• Net Profit: Bt5.1 billion (+2% yoy, -2% qoq).
• Loan Contraction: Loans declined by 7% yoy and 1% qoq, reflecting the bank’s selective growth strategy focused on high-quality portfolios.
• Net Interest Margin (NIM): Improved marginally to 3.26% in 2024, up from 3.24% in 2023.
• Non-Performing Loan (NPL) Ratio: Reduced to 2.59% in 4Q24, well below the 2024 target of 2.9%.

Strategic Focus on Quality Loan Growth

TTB has strategically pivoted towards a more selective approach in growing its loan portfolio, emphasizing high-yield retail lending to enhance profitability. The bank has also shifted its deposit base towards shorter-duration term deposit products, positioning itself to benefit from potential policy rate cuts. This strategy has translated into improved asset quality metrics and a reduction in provisioning expenses, which fell by 50% yoy in 4Q24.

• Provision Expenses: Bt4.7 billion (-50% yoy, -2% qoq).
• Credit Cost: 154 basis points in 2024, within the target range of 125-135 basis points.
• Loan Loss Coverage Ratio: Maintained at 151%, demonstrating prudence in risk management.

Medium-Term ROE Target and Dividend Payout Potential

TTB has set an ambitious medium-term goal of achieving a 10% return on equity (ROE). The bank reported an ROE of 9% in 2024, up from 8.2% in 2023, reflecting its strong operational momentum. Additionally, the potential for an upgraded dividend payout ratio further supports this target, making TTB an attractive proposition for investors.

Environmental, Social, and Governance (ESG) Initiatives

The bank has shown significant commitment to ESG principles, earning an AA ESG rating and a CG Report rating of 5. Key initiatives include:

• Environmental: Focus on climate finance and reducing greenhouse gas emissions.
• Social: Promoting financial literacy and inclusion, along with conducting human rights risk assessments.
• Governance: Ensuring robust cybersecurity and data privacy measures.

Valuation and Recommendations

UOB Kay Hian has maintained a BUY recommendation for TTB with a target price of Bt2.16. This valuation is based on the Gordon Growth Model, incorporating a cost of equity of 11% and a long-term growth rate of 2%. The current valuation implies a 0.8x 2025F price-to-book ratio, positioning the stock as an attractive investment opportunity.

Key financial metrics and forecasts include:

• 2024 Net Interest Income: Bt56,452 million.
• 2024 Non-Interest Income: Bt12,948 million.
• 2025F Net Profit: Bt22,485 million.
• 2025F Dividend Yield: 7.0%.

Financial Targets vs. Actual Performance

TTB largely met or exceeded its 2024 financial targets, with key highlights including:

• NPL Ratio: Achieved 2.59% vs. a target of ≤2.9%.
• Net Interest Margin: Achieved 3.26% vs. a target range of 3.1-3.25%.
• Loan Growth: Declined by 6.5%, reflecting the bank’s strategic focus on quality over quantity.

Key Risks and Earnings Revisions

The bank’s earnings forecasts for 2025 and 2026 were revised downward by 3.4% and 2.7%, respectively. Key risks include potential macroeconomic headwinds and challenges in maintaining asset quality amidst a changing interest rate environment.